The Q3 earnings season is almost over. According to our latest Earnings Preview report, 476 members of the S&P 500 Index – 97.3% in terms of market capitalization – have already reported their numbers.
The overall picture to have emerged is quite optimistic. According to the above report, total earnings for these companies are up 4% with the top line expanding 2.6%, both on a year-over-year basis. While 73.1% of the 476 companies reported better-than-expected earnings, 55.5% surpassed top-line expectations.
The report predicts that the S&P 500 Index will end the Q3 earnings season with bottom-line expansion of 3.6%. In the event of the forecast coming true, Q3 would be the first reporting cycle to end with earnings growth after bottom-line contraction in five consecutive quarters.
However, the picture is not so favorable for the transportation sector. The widely-diversified sector, which has seen all its S&P 500 members reporting their respective quarterly numbers, has ended the current reporting cycle with bottom-line contraction of 13.6%. The performance is worse than that in Q2 when the earnings for the S&P 500 transports decreased 12.4%.
The below-par performance is hardly surprising as the sector has been facing multiple headwinds like declining travel demand due to security fears, weak coal market, driver shortages and Brexit-induced uncertainty. Though most transportation companies – including the entire S&P 500 fraternity – have already reported their quarterly numbers, a few sector participants are yet to reveal their respective Q3 financials. Most of these companies are shipping stocks.
Shipping companies too have been facing headwinds like low freight rates and weak financial position to name a few. Key players in the segment like Seaspan Corporation (SSW - Free Report) and Scorpio Bulkers (SALT - Free Report) reported disappointing Q3 results. Hence, investors will keenly await reports from the likes of Golden Ocean Group Limited (GOGL - Free Report) and Danaos Corporation (DAC - Free Report) to find out if these companies can deliver impressive performances and turn the tide for the shipping industry.
Hamilton, Bermuda-based Golden Ocean Group Limited focuses on the transportation of bulk commodities. The company is scheduled to release Q3 results on Nov 22. According to our model, a company needs the right combination of two key ingredients – a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or at least 3 (Hold) – to increase its odds of an earnings surprise. We expect Golden Ocean Group Limited to surpass expectations as it has a Zacks Rank #3 and an Earnings ESP of +28.13%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Danaos Corporation owns and charters vessels to prominent liner companies. The Piraeus, Greece-based shipping companyis expected to report its Q3 results on Nov 22. The company’s 0.00% Earnings ESP (Most Accurate estimate is in line with the Zacks Consensus Estimate of 38 cents) complicates our surprise prediction in spite of its favorable Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.
Confidential from Zacks
This week, Zacks researchers have named 7 other stocks that look to break out even sooner than today's Bull of the Day. You can see these time-sensitive tickers free, and access additional trades that are not available to the public. Simply click here>>